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NCR Announces Fourth Quarter and Full Year 2017 Results

NCR Corporation (NYSE: NCR) reported financial results today for the
three and twelve months ended December 31, 2017. Fourth quarter and full
year highlights include:

Revenue of $1.78 billion, at the high end of previously provided
guidance

Software revenue up 1%driven by cloud revenue growth of 6%;
Full year net ACV of $67 million, up 46% from $46 million in the prior
year

GAAP diluted EPS of $(0.38), includes $130 million non-cash charge
related to US tax reform; Non-GAAP diluted EPS of $0.92, at the high
end of previously provided guidance

Services gross margin expansion of 280 basis points

Full year cash flow from operations of $755 million, and free cash
flow of $453 million, both within previously provided guidance

$300 million share repurchase planned for 2018 with $125 million
completed to date

2018 guidance announced

"Our fourth quarter results were consistent with our guidance and
reflect continued momentum in strategic areas such as cloud and Services
margin expansion," said Chairman and CEO Bill Nuti. "While ATM revenue
was lower than expected in 2017, growth in unattached software, cloud,
and recurring revenues, allowed us to build a stronger foundation going
into 2018. NCR continues to position itself as one of the world's
largest cloud companies facilitating omni-channel commerce and digital
transformation, and our SaaS solutions are gaining traction as evidenced
by consistent double digit net ACV growth. We enter 2018 excited about
the year ahead and confident in our company strategy. As such, we are
also announcing our repurchase of up to $300 million of shares in 2018."

"Going forward, we are focused on improving execution and we will
leverage our growing strength in cloud, combined with our end-to-end
smart edge hardware and services solution assets to deliver unmatched
value in the markets we serve, as businesses of every size undergo
Omni-Channel, digital enablement, and channel transformation journeys,"
said President and COO Mark Benjamin. "As we do this in 2018, we will
also prioritize driving sustainable margin improvement in our hardware
and services segments via specific programs targeted at driving higher
productivity, process efficiency, and, using technology as an enabler.
As we finalize these restructuring programs, we plan to achieve run-rate
savings of approximately $150 million per year by 2020."

In this release, we use certain performance metrics as well as certain
non-GAAP measures, including presenting certain measures on a constant
currency and adjusted constant currency basis. The performance metrics
include net annual contract value (or Net ACV) and the non-GAAP measures
include free cash flow and others with the words "non-GAAP," "adjusted,"
or "constant currency" in their titles. The performance metrics are
listed and described, and the non-GAAP measures are listed, described,
and reconciled to their most directly comparable GAAP measures, under
the heading "Performance Metrics and Non-GAAP Financial Measures" later
in this release.

Fourth Quarter 2017 Operating Results

RevenueFourth quarter revenue of $1.78 billion was down
1% year-over-year. Foreign currency fluctuations had a favorable impact
on the revenue comparison of 2%.

The following table shows the revenue by segment for the fourth
quarter:

$ in millions

2017

2016

% Change

% Change

Constant

Currency

Software License

$

95

$

103

(8

%)

(10

%)

Software Maintenance

96

96

-

%

(2

%)

Cloud

156

147

6

%

6

%

Professional Services

161

156

3

%

1

%

Software Revenue

$

508

$

502

1

%

-

%

Services Revenue

$

619

$

598

4

%

2

%

ATM

$

303

$

385

(21

%)

(22

%)

SCO

131

132

(1

%)

(1

%)

POS

218

177

23

%

20

%

IPS

3

8

(63

%)

(63

%)

Hardware Revenue

$

655

$

702

(7

%)

(9

%)

Total Revenue

$

1,782

$

1,802

(1

%)

(3

%)

Software revenue was up 1% primarily due to cloud revenue growth of 6%
and professional services revenue growth of 3%. This was partially
offset by lower software license revenue of 8% due to lower software
license revenue associated with lower hardware sales.

Services revenue was up 4% driven by hardware maintenance and
implementation services growth as a result of continued momentum in
channel transformation trends.

Hardware revenue was down 7% due to a 21% decline in ATM revenue and a
1% decline in SCO revenue, partially offset by a 23% increase in POS
revenue. ATM revenue reflected the lower backlog starting the quarter,
but was better than expected. SCO revenue was roughly flat, as expected,
but grew 66% sequentially from the third quarter of 2017. POS revenue
continued its momentum and was up significantly in the quarter due to
product replacements and new product introductions.

Gross MarginFourth quarter gross margin of $515 million
increased 8% from $479 million. Gross margin rate was 28.9%, up from
26.6%. During the fourth quarter of 2017, our annual pension
mark-to-market adjustment was $1 million of benefit compared to $38
million of cost in the prior year.

Fourth quarter gross margin (non-GAAP) of $527 million decreased 1% from
$530 million. Gross margin rate (Non-GAAP) was 29.6%, up from 29.4%. The
increase in gross margin rate (non-GAAP) was primarily due to continued
focus on productivity improvements in our Services segment, partially
offset by lower software license revenue, decreased ATM volumes and new
product introductions.

ExpensesFourth quarter operating expenses of $334 million
increased from $333 million. During the fourth quarter of 2017, our
annual pension mark-to-market adjustment was $29 million of expense
compared to $47 million of expense in the prior year.

Fourth quarter operating expenses (non-GAAP) of $284 million increased
from $266 million. The increases in expenses were due to increased sales
investment as we expand our strategic offers and go-to-market strategy.

Operating IncomeFourth quarter operating income of $181
million increased 24% from $146 million. Operating margin rate was
10.2%, up from 8.1%. During the fourth quarter of 2017, we recorded our
annual pension mark-to-market adjustment which was $28 million compared
to $85 million in the prior year.

Other (Expense)Fourth quarter other (expense) of $50
million decreased 12% from $57 million. Fourth quarter other (expense)
(non-GAAP) of $50 million decreased 11% from $56 million. These
decreases were primarily due to higher foreign currency losses in the
fourth quarter of 2016.

Income Tax Expenseand Impact of US Tax ReformFourth
quarter income tax expense of $164 million increased from $17 million.
Income tax expense includes a $130 million non-cash charge related to
the impact of the U.S. Tax Cuts and Jobs Act enacted in December 2017.
The non-cash charge represents a provisional amount and NCR's current
best estimate, which may be refined and adjusted over the course of 2018.

Fourth quarter income tax expense (non-GAAP) of $49 million increased
from $36 million in the prior year. Income tax expense (non-GAAP)
increased due to more favorable discrete benefits in the prior year
period.

Net Income from Continuing Operations Attributable to NCRFourth
quarter net loss from continuing operations attributable to NCR was $35
million decreased from net income from continuing operations
attributable to NCR of $68 million in the prior year. Fourth quarter net
income from continuing operations attributable to NCR (non-GAAP) of $142
million decreased from $168 million.

Cash FlowFourth quarter cash provided by operating
activities of $484 million decreased from $525 million. Free cash flow
was $402 million in the fourth quarter of 2017 as compared to $449
million in the fourth quarter of 2016. Fourth quarter cash flow was
strong, but was lower than the prior year due to a $100 million working
capital improvement in the fourth quarter of 2016. Full year cash
provided by operating activities was $755 million, and full year free
cash flow was $453 million, both within previously provided guidance.

Share Repurchase Program

During 2018, NCR plans to repurchase up to $300 million of its common
stock under its previously authorized share repurchase programs, and has
repurchased shares of its common stock for approximately $125 million
through the date of this release.

Full Year 2018 Outlook

In 2018, our revenue growth is expected to be 0% to 3%. Our GAAP diluted
earnings per share is expected to be $2.08 to $2.48, and our non-GAAP
diluted earnings per share is expected to be $3.30 to $3.45. Our
non-GAAP diluted earnings per share guidance assumes an effective tax
rate of 24% for 2018 compared to 25% in 2017. The decrease is due to the
expected impact of U.S. tax reform. Free cash flow is expected to
be approximately 90% of non-GAAP net income.

To accelerate our transformation journey, we are evaluating programs to
prioritize driving sustainable margin improvement in our hardware and
services segments targeted at driving higher productivity, process
efficiency, and, using technology as an enabler. As we finalize these
programs, NCR expects to incur a related pre-tax charge over the next
two years in the range of approximately $200 million to $250 million,
with $100 million to $150 million in 2018, that will be included in
income from operations. The cash impact of the restructuring plan is
expected to be approximately $150 million to $200 million over the next
two years, with $100 million in 2018. We plan to achieve run-rate
savings of approximately $150 million per year by 2020. The estimate of
the pre-tax charges and cash impact has been included in our 2018 GAAP
diluted earnings per share and free cash flow guidance.

Q1 2018 Outlook

For the first quarter of 2018, revenue growth is expected to be down 1%
to up 2%, GAAP diluted earnings per share is expected to be $0.16 to
$0.29, and non-GAAP diluted earnings per share is expected to be $0.41
to $0.47.

NCR will provide additional information regarding its first quarter and
full year 2018 guidance during its fourth quarter earnings conference
call and webcast.

2017 Fourth Quarter Earnings Conference Call

A conference call is scheduled for today at 4:30 p.m. (EDT) to discuss
the fourth quarter 2017 results and guidance for first quarter and full
year 2018. Access to the conference call and accompanying slides, as
well as a replay of the call, are available on NCR's web site at http://investor.ncr.com/.
Additionally, the live call can be accessed by dialing 888-820-9413
(United States/Canada Toll-free) or 786-460-7169 (International Toll)
and entering the participant passcode 2459485.

More information on NCR's Q4 2017 earnings, including additional
financial information and analysis, is available on NCR's Investor
Relations website at http://investor.ncr.com/.

About NCR Corporation

NCR Corporation (NYSE: NCR) is a leader in omni-channel solutions,
turning everyday interactions with businesses into exceptional
experiences. With its software, hardware, and portfolio of services, NCR
enables nearly 700 million transactions daily across financial, retail,
hospitality, travel, telecom and technology industries. NCR solutions
run the everyday transactions that make your life easier. NCR is
headquartered in Atlanta, Ga., with about 30,000 employees and does
business in 180 countries. NCR is a trademark of NCR Corporation in the
United States and other countries. NCR encourages investors to visit its
website which is updated regularly with financial and other important
information about NCR.

Note to Investors This release contains forward-looking
statements. Forward-looking statements use words such as "expect,"
"anticipate," "outlook," "intend," "plan," "believe," "will," "should,"
"would," "could," and words of similar meaning. Statements that describe
or relate to NCR's plans, goals, intentions, strategies, or financial
outlook, and statements that do not relate to historical or current
fact, are examples of forward-looking statements. The forward-looking
statements in this release include statements about NCR's plans for
further share repurchases in 2018; NCR's momentum in strategic areas;
market acceptance of NCR's SaaS solutions; NCR's confidence in its
strategy; NCR's areas of focus going forward, and its ability to deliver
value in the markets its serves; expectations regarding the
omni-channel, digital enablement and channel transformation journeys of
businesses of every size; NCR's areas of priority for its hardware and
services segments in 2018 and its programs to drive sustainable margin
improvement, including the expected timing, costs and benefits thereof;
and NCR's full-year and first quarter financial guidance and outlook
(including the sections entitled "2018 Outlook" and "Q1 2018 Outlook")
and the expected type and magnitude of the non-operational adjustments
included in any forward-looking non-GAAP measures. Forward-looking
statements are based on our current beliefs, expectations and
assumptions, which may not prove to be accurate, and involve a number of
known and unknown risks and uncertainties, many of which are out of
NCR's control. Forward-looking statements are not guarantees of future
performance, and there are a number of important factors that could
cause actual outcomes and results to differ materially from the results
contemplated by such forward-looking statements, including those factors
relating to: the strength of demand for ATMs and other financial
services hardware and its effect on the results of our businesses and
reportable segments; domestic and global economic and credit conditions
including, in particular, those resulting from the imposition or threat
of protectionist trade policies or import or export tariffs, global and
regional market conditions and spending trends in the financial services
and retail industries, new comprehensive U.S. tax legislation, modified
or new global or regional trade agreements, the determination by the
United Kingdom to exit the European Union, uncertainty over further
potential changes in Eurozone participation and fluctuations in oil and
commodity prices; the transformation of our business model and our
ability to sell higher-margin software and services; our ability to
improve execution in our sales and services organizations; our ability
to successfully introduce new solutions and compete in the information
technology industry; cybersecurity risks and compliance with data
privacy and protection requirements; the possibility of disruptions in
or problems with our data center hosting facilities; defects or errors
in our products; the impact of our indebtedness and its terms on our
financial and operating activities; the historical seasonality of our
sales; tax rates and new US tax legislation; foreign currency
fluctuations; the success of our restructuring plans and cost reduction
initiatives; manufacturing disruptions; the availability and success of
acquisitions, divestitures and alliances; our pension strategy and
underfunded pension obligation; reliance on third party suppliers; the
impact of the terms of our strategic relationship with Blackstone and
our Series A Convertible Preferred Stock; our multinational operations,
including in new and emerging markets; collectability difficulties in
subcontracting relationships in certain geographical markets;
development and protection of intellectual property; workforce turnover
and the ability to attract and retain skilled employees; environmental
exposures from our historical and ongoing manufacturing activities; and
uncertainties with regard to regulations, lawsuits, claims, and other
matters across various jurisdictions. Additional information concerning
these and other factors can be found in the Company's filings with the
U.S. Securities and Exchange Commission, including the Company's most
recent annual report on Form 10-K, quarterly reports on Form 10-Q and
current reports on Form 8- K. Any forward-looking statement speaks only
as of the date on which it is made. The Company does not undertake any
obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.

Performance Metrics and Non-GAAP Financial Measures

Performance Metrics.The term "net annual contract value"
or "net ACV" for any particular period means NCR's net bookings for
cloud revenue during the period, and is calculated as twelve months of
expected subscription revenues under new cloud contracts during such
period less twelve months of subscription revenues under cloud contracts
that expired or were terminated during such period, adjusted for twelve
months of expected pricing discounts or price increases from renewals of
existing contracts. Net ACV is a forward-looking measure that NCR tracks
and discloses as an indicator of potential cloud revenue growth in
future periods.

Non-GAAP Financial Measures. While NCR reports its results in
accordance with Generally Accepted Accounting Principles in the United
States, or GAAP, in this release NCR also uses the non-GAAP measures
listed and described below.

Non-GAAP Diluted Earnings Per Share (EPS), Gross Margin (non-GAAP),
Gross Margin Rate (non-GAAP), Operating Expenses (non-GAAP), Operating
Income (non-GAAP), Operating Margin Rate (non-GAAP), Other (Expense)
(non-GAAP), Income Tax Expense (non-GAAP), and Net Income from
Continuing Operations Attributable to NCR (non-GAAP). NCR's non-GAAP
diluted EPS, gross margin (non-GAAP), gross margin rate (non-GAAP),
operating expenses (non-GAAP), operating income (non-GAAP), operating
margin rate (non-GAAP), other (expense) (non-GAAP), income tax expense
(non-GAAP), and net income from continuing operations attributable to
NCR (non-GAAP) are determined by excluding, as applicable, pension
mark-to-market adjustments, pension settlements, pension curtailments
and pension special termination benefits and other special items,
including amortization of acquisition related intangibles, from NCR's
GAAP earnings per share, gross margin, gross margin rate, expenses,
income from operations, operating margin rate, other (expense), income
tax expense and net income from continuing operations attributable to
NCR, respectively. Due to the non-operational nature of these pension
and other special items, NCR's management uses these non-GAAP measures
to evaluate year-over-year operating performance. NCR also uses
operating income (non-GAAP) and diluted EPS (non-GAAP), to manage and
determine the effectiveness of its business managers and as a basis for
incentive compensation. NCR believes these measures are useful for
investors because they provide a more complete understanding of NCR's
underlying operational performance, as well as consistency and
comparability with NCR's past reports of financial results.

Free Cash Flow and Free Cash Flow as a Percentage of Non-GAAP Net
Income (or Free Cash Flow Conversion Rate). NCR defines free cash
flow as net cash provided by/used in operating activities and cash flow
provided by/used in discontinued operations less capital expenditures
for property, plant and equipment, additions to capitalized software,
discretionary pension contributions and pension settlements. NCR's
management uses free cash flow to assess the financial performance of
the Company and believes it is useful for investors because it relates
the operating cash flow of the Company to the capital that is spent to
continue and improve business operations. In particular, free cash flow
indicates the amount of cash generated after capital expenditures which
can be used for, among other things, investment in the Company's
existing businesses, strategic acquisitions, strengthening the Company's
balance sheet, repurchase of Company stock and repayment of the
Company's debt obligations. Free cash flow does not represent the
residual cash flow available for discretionary expenditures since there
may be other nondiscretionary expenditures that are not deducted from
the measure. NCR also describes the ratio of free cash flow to non-GAAP
net income (or free cash flow conversion rate), which is calculated as
free cash flow divided by non-GAAP net income. NCR's management targets
an annual free cash flow conversion rate at or above the range described
in this release because management believes that a conversion rate at or
above that range represents the efficient conversion of non-GAAP net
income to free cash flow for its business. Free cash flow and free cash
flow conversion rate do not have uniform definitions under GAAP and,
therefore, NCR's definitions may differ from other companies'
definitions of these measures.

Constant Currency, IPS Divestiture and Adjusted Constant Currency.
NCR presents certain financial measures, such as period-over-period
revenue growth, on a constant currency basis, which excludes the effects
of foreign currency translation by translating prior period results at
current period monthly average exchange rates. Due to the overall
variability of foreign exchange rates from period to period, NCR's
management uses constant currency measures to evaluate
period-over-period operating performance on a more consistent and
comparable basis. NCR also presents certain financial measures on an
adjusted constant currency basis, which excludes both the effects of
foreign currency translation, as described above, and the results of
NCR's Interactive Printer Solutions (IPS) business for the comparable
prior period after completion of the sale of the business (which results
were previously included in NCR's Hardware segment). NCR completed the
sale of all but the Middle East and Africa assets of its Interactive
Printer Solutions (IPS) division to Atlas Holdings LLC on May 27, 2016.
NCR's management believes that presentation of financial measures
without these results is more representative of the company's
period-over-period operating performance, and provides additional
insight into historical and/or future performance, which may be helpful
for investors.

NCR's definitions and calculations of these non-GAAP measures may differ
from similarly-titled measures reported by other companies and cannot,
therefore, be compared with similarly-titled measures of other
companies. These non-GAAP measures should not be considered as
substitutes for, or superior to, results determined in accordance with
GAAP. These non-GAAP measures are reconciled to their most directly
comparable GAAP measures in the tables below.

(1) Non-GAAP diluted EPS is determined using the
conversion of the Series A Convertible Preferred Stock into common
stock in the calculation of weighted average diluted shares
outstanding. GAAP EPS is determined using the most dilutive
measure, either including the impact of dividends or deemed
dividends on the Company's Series A Convertible Preferred Stock in
the calculation of net income or loss available to common
stockholders or including the impact of the conversion of the
Series A Convertible Preferred Stock into common stock in the
calculation of the weighted average diluted shares outstanding.
Therefore, GAAP diluted EPS and non-GAAP diluted EPS may not
mathematically reconcile.

(2) Except for the adjustments noted herein, this
guidance does not include the effects of any future
acquisitions/divestitures, restructuring activities, pension
mark-to-market adjustments, taxes or other events, which are
difficult to predict and which may or may not be significant.

* Note: The total capital expenditures of $294 million in 2017
includes $60 million related to the new world headquarters in
Atlanta, Georgia. This $60 million is offset by $44 million of
reimbursements by the lessor included in net cash provided by
operating activities.

Net (loss) income from continuing operations attributable to NCR
common stockholders

(46

)

56

128

234

(Loss) from discontinued operations, net of tax

(10

)

(11

)

(5

)

(13

)

Net (loss) income attributable to NCR common stockholders

$

(56

)

$

45

$

123

$

221

Net (loss) income per share attributable to NCR common
stockholders:

Net (loss) income per common share from continuing operations

Basic

$

(0.38

)

$

0.45

$

1.05

$

1.86

Diluted

$

(0.38

)

$

0.43

$

1.01

$

1.80

Net (loss) income per common share

Basic

$

(0.46

)

$

0.36

$

1.01

$

1.76

Diluted

$

(0.46

)

$

0.35

$

0.97

$

1.71

Weighted average common shares outstanding

Basic

121.9

124.5

121.9

125.6

Diluted (continuing operations)

121.9

157.4

127.0

157.4

Diluted (net income)

121.9

128.6

127.0

129.2

(1) Diluted EPS is determined using the most dilutive
measure, either including the impact of the dividends and deemed
dividends on NCR's Series A Convertible Preferred Shares in the
calculation of net income or loss per common share from continuing
operations and net income or loss per common share or including
the impact of the conversion of such preferred stock into common
stock in the calculation of the weighted average diluted shares
outstanding.

Series A convertible preferred stock: par value $0.01 per share, 3.0
shares authorized, 0.8 shares issued and outstanding as of December
31, 2017, September 30, 2017, and 0.9 shares issued and outstanding
as of December 31, 2016

810

799

847

Stockholders' equity

NCR stockholders' equity:

Preferred stock: par value $0.01 per share, 100.0 shares authorized,
no shares issued and outstanding as of December 31, 2017, September
30, 2017, and December 31, 2016

-

-

-

Common stock: par value $0.01 per share, 500.0 shares authorized,
122.0, 121.5, and 124.6 shares issued and outstanding as of December
31, 2017, September 30, 2017, and December 31, 2016